Air Canada gave out $10M in bonuses amid bailout negotiations with Ottawa
Air Canada’s top executives and eligible management received $10 million worth of COVID-19-specific bonuses, as well as special share purchase options to offset base salary cuts over the last year, CTV News has confirmed.
The “COVID-19 Pandemic Mitigation Bonus” was awarded based on management’s “exceptional performance during this unprecedented period,” reads the company’s management proxy circular provided to shareholders.
While the board actually approved $20 million worth of compensation, representing 50 per cent of the annual incentive plan for 2020, half of that amount was dished out.
It came at the same time the federal government was negotiating a major bailout package with the airline.
The “liquidity program” unveiled in April is worth $5.9 billion, which includes $4 billion in loans, a $500 million investment in Air Canada stock and a separate $1.4 billion loan to help facilitate customer refunds. It also put a cap on executive compensation at $100 million per year.
“This support comes with strict conditions to protect Canadian travellers, Canadians’ tax dollars and Air Canada’s workers,” said Deputy Prime Minister and Finance Minister Chrystia Freeland on April 12, the day the deal was announced.
Air Canada has also tapped into the funds accessible through the Canada Emergency Wage Subsidy (CEWS) beginning in March 2020.
“The net benefit for employee wages under this program in 2020 was $554 million, which has supported the airline in retaining a workforce well in excess of currentcapacity levels. In September 2020, the Government of Canada announced an extension of the program to June 2021. Air Canada intends to continue its participation in the CEWS program, subject to meeting the eligibility requirements,” reads the document.
The company’s former CEO Calvin Rovinescu who retired in February of this year and then-deputy CEO and CFO Michael Rousseau, who has taken over Rovinescu’s position – both agreed to forgo 100 per cent of their salary from April to June 2020 and 20 per cent for the rest of the year.
For the former, it represented a salary decline of $490,000 and for the latter, a loss of $245,000. Other executives saw a 50 per cent hit to their salary in the second quarter and 20 per cent for the remainder of the year.
The document reads that share appreciation units (SAU) were granted to each executive based on: “i) total salary reduction incurred and ii) the 5-day volume weighted average price of the Air Canada share price as at December 31, 2020 ($22.90).”
“Despite this historically difficult year for Air Canada’s finances, our leaders helped the company and its shareholders weather the storm and keep the business in strong financial position while maintaining respect for our brand and what it represents for Canadians and global travelers. We believe we must retain and motivate our senior leaders to help Air Canada recover as quickly as possible, and you will see some compensation decisions to support those goals,” the document reads.
The pandemic resulted in a 73 per cent decline in passenger travel for the airline and an operating loss of nearly $3.8 billion. In total, the company has axed more than half its workforce since last March.
In a statement to CTVNews.ca, the president of the Air Canada component of the Canadian Union of Public Employees Wesley Lesosky said he was “disappointed the company was finding ways to keep paying bonuses to executives, while at the same time cutting off a lifeline for thousands of my members by denying them access to the federal wage subsidy. Our members were left out to dry, and the federal government stood by and let it happen.”
NDP Leader Jagmeet Singh said the news is “absolutely, unequivocally wrong” and that the CEWS should have come with strings attached.
“If any company takes public money, they have to commit to no compensation for executive increases, no shareholder compensation, none of those things should happen,” he said in an interview on CTV News Channel’s Power Play on Monday. “The money should be going to workers, our whole goal in all of this was to secure the employment of workers.”
Meanwhile, Conservative Leader Erin O’Toole told reporters that the government should have acted faster in getting aid to the tourism and travel industries hit hard by COVID-19, and that the support should have gone directly to frontline workers.
Freeland’s spokesperson told CTV News in a statement that Air Canada would be “best placed” to respond to questions about executive compensation prior to their agreement with the federal government.